Austrian school

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Austrian School

A school of economics that argues that human behavior is so complex it is extremely difficult or impossible to model. For that reason, it promotes deductive, as opposed to inductive, reasoning in its analysis. It is an extremely individualist school, advocating laissez faire policies and opposing all or nearly all government interventions in the economy. The Austrian School, and particularly its rejection of modeling, has faced criticism from both right- and left-leaning economists. It is so named because most of its founders were born in or around Austria. See also: Ludwig von Mises.

Austrian school

a group of late 19th-century economists at the University of Vienna who established and developed a particular line of theoretical reasoning. The tradition originated with Professor Carl Menger who argued against the classical theories of value, which emphasized PRODUCTION and SUPPLY. Instead, he initiated the ‘subjectivist revolution’, reasoning that the value of a good was not derived from its cost but from the pleasure, or UTILITY, that the CONSUMER can derive from it. This type of reasoning led to the MARGINAL UTILITY theory of value whereby successive increments of a commodity yield DIMINISHING MARGINAL UTILITY.

Friedrich von Wieser developed the tradition further, being credited with introducing the economic concept of OPPORTUNITY COST. Eugen von Böhm-Bawerk helped to develop the theory of INTEREST and CAPITAL, arguing that the price paid for the use of capital is dependent upon consumers’ demand for present CONSUMPTION relative to future consumption. Ludwig von Mises and Friedrich von Hayek subsequently continued the tradition established by Carl Menger et al. See also CLASSICAL ECONOMICS.

In the small but feisty emerging community of academic Austrian economists, Garrison was omnipresent and played a significant role in navigating a "middle ground" for those inspired to do research in the Austrian tradition.

Addressing the national deficit does not necessarily fix the problems of national debt--only tax reform and demanding that Congress, which actually controls the budget and all fiscal allocations not the President, act responsibly instead of following the failed economic policies of pre-WWII Austrian economists.

In contrast, Ron Paul-style libertarianism, guided by the insights of Ludwig von Mises and other Austrian economists, recognizes that any attempt to impose an integrated vision of government is doomed to failure.

He notes that Austrian economists recognize that the free market facilitates economic order resulting from a multitude of decisions made by individual entrepreneurs, capitalists, workers, landowners, and social organizations, not from the result of a central economic plan.

Forster and Lionel Trilling (liberals), Richard Weaver and Russell Kirk (conservatives), and Jean-Francois Lyotard and Jean Baudrillard (postmodernists) would probably delight in Cantor and Cox's celebration of human complexity, although none of these critics, of course, would have considered themselves Austrian economists.

Penn Bullock's otherwise good article on Ben Bernanke ("Bernanke's Philosopher," December) leaves the impression that all Austrian economists reject Milton Friedman's view that the Fed's contraction of the money supply during the early 1930s was an important cause of the Great Depression and that all Austrians reject the notion that expanding the money supply is ever justified.

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